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Credit Card Debt into Persistent Debts

Once you make the minimum payments on your credit card for more than several months, you’re likely to get a letter from your credit card institution requesting to raise your payment each month.

The FCA or Financial Conduct Authority indicate that all customers making minimum payments for 18 months or more has to raise their payments. This is because, when making minimum payments, the amount goes to your interest and charges and not to your debit balance.

This was taken into account in terms of credit card debt but now includes catalogue debts and store cards.

Receiving a Notice about Persistent Debt

The FCA sets rules that dictate your credit card provider to notify you whenever your account is classified under persistent debt. When this happens, they will also ask you to pay your debt more than the minimum payment. They’ll also inform you what options you have to resolve your debt and the consequences that can occur if you can’t pay more each month.

This does not mean that your creditor compels you to pay off your debt. They simply implement the rules to prevent future issues with your debts.

Will my credit card be suspended?

As a last resort, your credit card provider might suspend your card if you deliberately ignore increasing your payments. This is to prevent your card from accumulating larger balance.

How can I avoid being in persistent debt?

The following are some of the steps that you can consider to avoid being in a persistent debt:

  • Speaking to your credit card provider

Your provider may agree in suspending the interest charges for a short period. Besides, if you’re thinking of moving to another institution provider through a balance transfer, you can inform your provider and check whether they have better offer for you.

  • Increasing Payments each month and stop using the card

Once you stop using the card, you can avoid getting a huge balance. You may also increase your payment each month to pay off both interest and debt balance.

  • Consider options to pay off the debt faster

You may consider transferring your card balance to a provider that offers lower rates and 0% balance transfer.

How much of a monthly payment incorporates my balance?

Your credit card payment each month is deducted from the interest and necessary charges, and in reducing a percentage of your total debt.

Making minimum payment each month can take you long to pay the entire debt. The minimum amount you pay will meet the interest payments and only a small percentage of it goes to your balance.

On the contrary, if you pay more than the minimum each month, the excess amount will be deducted from the debt balance. This can help you pay off your debt faster.

How do I pay off my persistent debt?

Once you know how your budget works with the flow of your income and expenses each month, you’ll be able to find out how much you can afford to pay off your debt. After you’ve come up with the figure, you should also be cautious in spending within your means.

Granted, you’ve created a budget and determine how much money left you can afford for payments, you ma consider:

  • Pay the usual amount every month – Arrange an affordable amount that you can add up on top of your minimum payment
  • Paying minimum payment, along with a fixed amount every month  – Paying some additional pounds every month better work out a fixed amount for a monthly payment
  • Make one-off extra payments based on what you can afford – You must pay the minimum each month and can add up certain payments on top of it from time to time.

Help with Debts and Budget

If you can’ afford to pay more than the minimum amount each month, this is a wake-up call that you’re struggling with debts. While still early, it’s best that you get debt help and advice right away. 

We provide debt help and advice for free. Our online debt advice tool is also available for free. Should you wish to speak to our debt specialists, you can call on  0800 193 1024.